Government Eases Capital Gains Tax Rules for Property Owners: What It Means for You
The government has revised the long-term capital gains tax rules for property owners, offering relief to those affected by the recent changes. Here's how the new rules work.
Capital Gains TaxProperty OwnersLong Term Capital GainsIndexation BenefitTax ReliefReal EstateAug 07, 2024
However, this change significantly impacted people owning real estate. The people who had made significant gains in a short term benefitted as their tax was reduced in the new proposal. But those people who had owned real estate for a long period of time would possibly become liable to a higher amount of tax.
In response to public outcry, the government has now allowed taxpayers to choose between two options Pay a 20% tax on capital gains after adjusting the purchase price for inflation (indexation), or pay a 12.5% tax on capital gains without indexation adjustment. Taxpayers can select the option that results in a lower tax liability.
For instance, if you bought a property for Rs 1 crore in 2002 and sold it for Rs 5 crore in 2024, you can choose between paying a 20% tax on the adjusted profit after considering inflation, or paying a 12.5% tax on the entire profit of Rs 4 crore.
The government's decision to allow taxpayers to choose between a 12.5% tax rate without indexation or a 20% rate with indexation on long-term real estate transactions (acquired before July 23, 2024) offers flexibility for sellers, who can now choose the option that best suits their financial situation and the extent of their property's appreciation.
Frequently Asked Questions
What is the new tax rate for long-term capital gains on property?
The new tax rate is 12.5% without indexation adjustment or 20% with indexation adjustment.
Who is eligible for the revised tax rules?
Taxpayers who acquired property before July 23, 2024, are eligible for the revised tax rules.
Can taxpayers choose between the old and new tax regimes?
No, taxpayers cannot choose between the old and new regimes. The government will determine the applicable tax based on the calculations.
What if the old regime results in a loss for the taxpayer?
If the old regime results in a loss, the taxpayer cannot claim this loss under the new regime.
How will the revised tax rules affect property owners?
The revised tax rules will offer flexibility to property owners and ensure they are not adversely affected by the removal of the indexation benefit.
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